Calise Beauty School, Inc. v. New York State Higher Education Services Corp.

Yesawich Jr., J. Appeal from a judgment of the Supreme Court (Carpinello, J.), entered July 18, 1996 in Albany County, which dismissed petitioner’s application, in a proceeding pursuant to CPLR article 78, to review a determination of respondent finding that petitioner had miscertified the class year of certain of its students. [923] Petitioner is a licensed beauty school in Brooklyn; during the relevant time period, some of its students received financial assistance in the form of Federally-guaranteed student loans. Respondent is the State agency charged with, inter alia, monitoring participating schools’ compliance with Federal statutes and regulations governing these loans. When reviewing a sample of 50 loan applications submitted by petitioner’s students, respondent discovered that petitioner had erroneously certified several of those students as having advanced in class year (rendering them eligible for larger loans than they could have obtained if their status had been correctly reported), despite their failure to complete the requisite number of hours of instruction. There was no indication that the errors resulted in any student receiving a larger loan than that to which he or she was actually entitled. Rather, the miscertifications apparently stemmed from confusion engendered by the so-called “seven-month rule”, which allowed a student to obtain a second loan if seven months had passed since the beginning of the previous loan period, even if he or she had not yet advanced in class year (see, 34 CFR 682.401 [b] [2] [ii] [former (B)]). Each of the students in question fell into this category. Upon discovering these errors, respondent requested that petitioner review the records of each student certified for a second-year loan for the academic years 1992-1993 and 1993-1994, and submit a report detailing the results. Petitioner refused, and respondent ultimately issued a final determination finding, inter alia, that petitioner had miscertified eight students, and had improperly disbursed funds to these students “as second year students”, although they had not completed 900 clock hours of instruction, in violation of 34 CFR 668.2 (b). As a consequence, petitioner was directed to perform the record review outlined above and to submit, along with its report, the attendance record of each student listed therein. Petitioner’s application for annulment of respondent’s determination was dismissed by Supreme Court and this appeal followed. We affirm. Inasmuch as respondent’s interpretation of the relevant regulations is not, as petitioner contends, contrary to reason or to their plain language, it is entitled to deference (see, Matter of Rodriguez v Perales, 86 NY2d 361, 367). Moreover, the fact that petitioner did not benefit, financially or otherwise, from its violation of those regulations does not negate the fact that a violation occurred. While perhaps relevant to the appropriateness of the sanction imposed (notably, no monetary penalty was exacted in this instance), neither this factor, nor respondent’s representation that “no liabilities [924] should be assessed in the absence of formal guidance” from the Department of Education, bears on the rationality of the finding that petitioner wrongly certified students as having progressed to the second year of their studies when they had not, in fact, done so. Hence, this aspect of the determination, being amply supported by the facts, must be upheld (see, Matter of Reader's Digest Assn. v State Tax Commn., 103 AD2d 926, 927). And, given that mistakes of this kind could result in students receiving loan funds in excess of the amounts to which they are entitled, it was not unreasonable for respondent, once it uncovered the fact that petitioner had misconstrued the relevant regulations, to insist on reviewing the remainder of petitioner’s records, so that the actual fiscal impact of the errors made—if any—could be assessed. In sum, there being no basis in the record for affording petitioner the relief it seeks, the petition was properly dismissed. White, Casey and Spain, JJ., concur.